Is Refinancing Worth the Cost?

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Have you ever heard the old rule of thumb that says you should only refinance if the new interest rate is at least 2 points below your present rate? That may have been good advice years ago, but with refinancing dropping in cost recently, it's a good time to think about a new loan! A refinanced mortgage loan may be worth its cost several times over, because of the advantages that it brings, as well as a lower interest rate.


You may be able to lower your interest rate (sometimes by a lot) and have smaller mortgage payments with a refinanced loan. Additionally, you could have the option of pulling out some of the equity in your house by "cashing out" a sum of money to remodel your home, consolidate debt, or take your family on a vacation. You could be able to refinance to a shorter-term mortgage, enabling you to build your equity quicker.

Fees and Expenses

All of these advantages do come with some expense, though. When you refinance, you are paying for many of the same things you were charged for at the time you got your original mortgage loan. Among these will be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.

Doing the Math

You could offer to pay discount points (prepaid interest) to attain a more favorable interest rate. When you pay (on average) 3% of the loan amount initially, the savings for the life of the refinanced loan can be great. Please talk to a tax professional before acting on rumors that these paid points can be deducted on your taxes.

One more cost that a borrower may take into account is that a lower rate of interest will reduce the interest amount you will be able to deduct on your taxes. We can help you do the math! Call us at 5623200510.

Most borrowers find that the savings per month quickly balance out the up-front cost of a refinance. We can help you find out your options, considering the effect a refinance might have on your taxes, how likely you may be to sell in the near future, and your available cash. Call us at 5623200510 to get started.

Curious about refinancing? Call us: 5623200510.

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